Can my employer impose mandatory tip-pooling in the workplace?

Frank S. Clowney III

Those who work in the service industry often rely on tips to supplement their wages. These workers will often go above and beyond, because they want to treat their customers nicely and because they may get a good tip out of it. But if their employer tells them they must contribute their tips to a “tip pool” they may wonder if this is legal.

What are tips?

California law states that “gratuity” includes tips, gratuity and other money paid, given or left for a worker by a customer that go beyond what the customer owes on the bill. Tips are the property of the worker who earned them. Tips are not the property of the employer. Tips cannot be used as a credit towards an employer’s duty to pay the minimum wage. Tips do not count as the worker’s regular rate of pay for overtime purposes. Mandatory service charges are not considered tips but are more in the nature of a bonus paid by the employer.

What is tip pooling?

Mandatory tip pooling, however, is legal. Through tip pooling all staff that fall within the “chain of service” to a customer must pool together tips and then share them out between them. However, owners, managers and supervisors cannot receive a portion of these tips, even if they participated in the chain of service. Also, any tip pooling policies in the workplace must be fair and reasonable.

Those who work in the service industry and perform a good job deserve to be tipped appropriately. They often rely on these tips to make ends meet financially. Therefore, it is important that tipped employees in California are familiar with state law regarding tips so they can protect their rights if necessary.